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Date
Monday, Nov. 3, 2025 at 4:30 p.m. ET
Call participants
Chief Executive Officer — Jayme Mendal
Chief Financial Officer — Joseph Sanborn
Vice President, Investor Relations — Brinlea C. Johnson
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Risks
Joseph Sanborn noted that increased investments in new traffic channels are expected to decrease variable marketing margin (VMM) by "a couple of 100 basis points" in the fourth quarter, according to Joseph Sanborn in Q4, placing downward pressure on near-term profitability.
Management stated, "there can be some impact in VMM in the quarter" due to seasonally higher advertising costs and increased competition for traffic, referring to the non-GAAP variable marketing margin (VMM) for the fourth quarter.
Takeaways
Total Revenue -- $173.9 million total revenue, up 20% year over year, establishing a new quarterly high driven mainly by enterprise carrier spend growth of over 27%.
Auto Insurance Revenue -- $157.6 million, up over 21% year over year, representing the majority of total revenue.
Home & Renters Insurance Revenue -- $16.3 million, up 15% year over year.
Variable Marketing Dollars (VMD) -- $50.1 million VMD, a record level, increasing 14% year over year.
Variable Marketing Margin (VMM) -- 28.8% variable marketing margin (VMM), with expectations to decline to roughly 27% variable marketing margin (non-GAAP) at the guidance midpoint for the fourth quarter due to new traffic investments.
Net Income -- Net income was $18.9 million, a record result, rising from $11.6 million in the previous year period.
Adjusted EBITDA -- Adjusted EBITDA was $25.1 million, up 33% year over year, exceeding revenue growth rates.
Adjusted EBITDA Margin -- 14.4% adjusted EBITDA margin, reflecting operational leverage and efficiency gains.
Operating Cash Flow -- $19.8 million for the third quarter, affected by temporary working capital timing differences.
Cash Operating Expenses -- Adjusted EBITDA was $25.1 million for Q3 2025, flat year over year, but up $1.5 million sequentially due to planned technology and AI investments.
Share Repurchase -- 900,000 shares repurchased for $21 million, reducing shares outstanding by 2% without impacting public float liquidity.
Balance Sheet -- $146 million in cash and cash equivalents as of the end of the third quarter and no debt at period end.
Carrier Partner Spend -- 80% of top 25 carriers remained below their peak historical quarterly spend, indicating further room for revenue growth.
Smart Campaigns 3.0 Launch -- Management highlighted a "7% improvement in ad spend efficiency" for clients transitioning from the 2.0 to 3.0 version.
Cross-Selling Agent Products -- Over 35% of local agent customers now use more than one of the company's four agent products as of October 2025, demonstrating early multiproduct traction.
2025 Guidance -- VMD between $46 million and $48 million (7% growth at midpoint) for the year, and adjusted EBITDA between $21 million and $23 million (16% growth at midpoint) for the year.
Record Full-Year Outlook -- At the guidance midpoint, full-year revenue is projected to grow approximately 35% and adjusted EBITDA (non-GAAP) growth of over 55% for the full year, reflecting strong operating leverage.
Strategic Focus -- CEO Mendal reiterated the objective to reach $1 billion in annual revenue within two to three years through organic growth and AI-driven multiproduct expansion.
Summary
EverQuote (EVER +4.18%) recorded its highest-ever quarterly revenue, profitability, and operating cash flow metrics, highlighted by double-digit year-over-year growth across most major financial indicators. The company indicated continued expansion of its AI-powered Smart Campaigns, signaling measurable efficiency gains and deeper integration with carrier partners. Executive commentary specifically pointed to a favorable multi-year underwriting environment for PNC carriers and the increasing adoption of EverQuote's broadening multiproduct suite among both carriers and local agents, laying a strategic foundation for future scale.
Current investments in new traffic channels, such as social, video, display, connected TV, and AI-powered search, are targeted to facilitate future revenue growth, with management expecting an initial negative impact on VMM (variable marketing margin) over the next one to two quarters before normalization.
Adjusted EBITDA margin (non-GAAP) expansion is attributed primarily to disciplined expense control and increased automation from AI and machine learning, with management prioritizing function-by-function efficiency improvements across the business.
Guidance for Q4 reflects an atypical expectation for sequential revenue growth despite typical seasonality, based on active carrier acquisition spending outpacing historical year-end patterns.
Executive responses confirmed the path to the $1 billion revenue goal is primarily organic, driven by ongoing execution in core distribution, expanded agent and carrier solutions, and growth beyond the auto vertical.
California ("CALIS four") is now a "top three to five state" by spend, according to Jayme Mendal but remains below anticipated scale, indicating further expansion potential as carrier participation strengthens.
Industry glossary
Variable Marketing Dollars (VMD): Net revenue after deducting advertising costs, measuring marketing-driven contribution before fixed costs.
Variable Marketing Margin (VMM): VMD as a percentage of revenue, reflecting transactional channel economics before operating expenses.
Smart Campaigns: EverQuote's proprietary machine learning–driven bidding platform used by insurance carriers to optimize customer acquisition strategy within the marketplace.
PNC Insurance: Property and casualty insurance, encompassing auto, home, renters, and related insurance lines.
CALIS four: Refers to the California insurance segment’s recovery and expansion dynamics discussed in the call.
Full Conference Call Transcript
Brinlea C. Johnson: Thank you. Good afternoon, and welcome to EverQuote, Inc.'s third quarter 2025 earnings call. We will be discussing the results announced in our press release issued today after the market closed. Joining me on the call this afternoon are Jayme Mendal, EverQuote, Inc.'s Chief Executive Officer, and Joseph Sanborn, EverQuote, Inc.'s Chief Financial Officer. During the call, we will make statements related to our business that may be considered forward-looking statements under federal securities laws, including statements concerning our financial guidance for 2025. Forward-looking statements may be identified with words and phrases such as expect, believe, intend, anticipate, plan, may, upcoming, and similar words and phrases.
Statements reflect our views only as of today and should not be considered our views as of any subsequent date. We specifically disclaim any obligation to update or revise these forward-looking statements except as required by law. Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from our expectations. For a discussion of those risks and uncertainties, please refer to our SEC filings, including our annual report on Form 10-Ks and our quarterly reports on Form 10-Q on file with the Securities and Exchange Commission and available on the Investor Relations section of our website.
Finally, during the course of today's call, we will refer to certain non-GAAP financial measures which we believe are helpful to investors. A reconciliation of GAAP to non-GAAP measures was included in the press release we issued after the close of market today and is available on the Investor Relations section of our website. And with that, I will turn it over to Jayme Mendal.
Jayme Mendal: Thank you, Brinlea, and thank you all for joining us today. We achieved record top and bottom line performance in Q3. Our team continues to help carriers and agents drive profitable policy growth amidst a healthy underwriting environment. We are making steady progress toward our vision of being the number one growth partner to PNC insurance providers by delivering better-performing referrals, bigger traffic scale, and a broader suite of products and services. As we innovate new products, release features, and further embed AI into our marketplace, we are fast evolving from a lead gen vendor to a growth solutions partner for our customers.
We continue to partner more closely with carriers and differentiate our marketplace through Smart Campaigns, our AI bidding product. In Q3, we launched Smart Campaigns 3.0, which leverages our latest model to deliver better performance than our 2.0 version. For example, a customer who recently migrated from 2.0 to 3.0 saw a 7% improvement in ad spend efficiency, an early indication that the new model is materially improved. When customers adopt Smart Campaigns and experience these types of performance improvements, they often shift more budget to EverQuote, Inc. As we secure more budget, we also gain more data, and as a consequence, our AI-driven systems can further improve campaign performance.
As evidence of this flywheel working, in Q3, we were notified by a major national carrier that we have become their number one customer acquisition partner in our channel for the first time. Turning to our local agent customers, we continue making progress in our evolution from a lead vendor to a one-stop growth partner. As we roll out and gain adoption of additional products and services to help agents grow, as of October, over 35% of our local agent customers are using more than one of EverQuote, Inc.'s four agent products, which demonstrates broadening adoption but also ample room for continued growth through product expansion within our existing customer base.
Our consumer acquisition teams continued executing well in Q3, despite elevated competitive pressure in the insurance advertising landscape. In Q4, we have begun to ramp investments in scaling new traffic channels and programs to support future growth. Since our IPO in 2018, EverQuote, Inc. has committed to growing 20% and expanding adjusted EBITDA margin by 100 to 150 basis points per year on average. Over the six-year period through 2024, we delivered as promised with a 21% revenue CAGR and an average of over 100 basis points of margin improvement per year. As we approach the end of the year, we have confidence that we will deliver once again in 2025.
And now we have set our sights on reaching $1 billion of annual revenue in the next two to three years while transforming into a multiproduct AI-powered profitable growth solutions provider for carriers and agents. Consistent with our track record of saying what we will do and doing what we say, we look forward to updating you on our progress as we drive full steam ahead into 2026. I will now turn the call over to Joseph Sanborn to discuss our financial results.
Joseph Sanborn: Thank you, Jayme, and thank you all for joining. Today, I will be discussing our financial results for 2025 as well as our guidance for the fourth quarter of this year. We delivered record results in the third quarter, achieving new quarterly highs for revenue, variable marketing dollars (VMD), adjusted EBITDA, and net income. In addition, we continue to enhance our operating performance and drove expanding levels of profitability, as reflected by our record adjusted EBITDA margin. Total revenues in the third quarter grew 20% year over year to a record $173.9 million. Revenue growth was primarily driven by stronger enterprise carrier spend, which was up over 27% from the comparable period last year.
Revenue from our auto insurance vertical increased to $157.6 million in Q3, up over 21% year over year. Revenue from our home and renters insurance vertical increased to $16.3 million in Q3, up 15% year over year. VMD increased to a record $50.1 million in the third quarter, up 14% from the prior year period. Variable marketing margin (VMM) was 28.8% for the quarter. Turning to operating expenses and the bottom line, as we scale and drive top-line growth, we continue to expand operating leverage in our business through disciplined expense management and by utilizing AI and other technology investments to deliver incremental efficiency.
In the third quarter, we grew net income to a record $18.9 million, up from $11.6 million in the prior year period. Q3 adjusted EBITDA increased to a record $25.1 million, representing a 33% increase year over year and significantly outpacing the strong revenue growth we achieved during the same period. Adjusted EBITDA margin expanded to 14.4%. Cash operating expenses, which exclude advertising spend and certain non-cash and other one-time charges, were $25.1 million in Q3. As expected, this was up from the previous quarter by approximately $1.5 million for planned investments in our AI and technology capabilities but effectively flat on a year-over-year basis. We reported operating cash flow of $19.8 million for the third quarter.
To note, temporary timing differences in working capital impact our cash conversion from adjusted EBITDA compared to prior quarters. During the quarter, we repurchased 900,000 shares of our Class A common stock for $21 million from League Ventures, which is an entity affiliated with funds advised by David Blunden, EverQuote, Inc.'s chairman and co-founder. We believe this was an accretive use of capital, which enabled us to efficiently execute a portion of our recently announced $50 million share buyback program. This transaction reduced shares outstanding by 2% in a manner that did not adversely impact liquidity in EverQuote, Inc.'s public float.
This repurchase reiterates our confidence in EverQuote, Inc.'s ability to generate long-term sustainable growth and free cash flow while maintaining a strong balance sheet. We ended the period with no debt and cash and cash equivalents of $146 million. We continue to operate in a favorable environment where carriers are broadly enjoying healthy underwriting margins and consumer shopping activity remains elevated. We expect these conditions to persist for the foreseeable future. Of note, approximately 80% of our top 25 historical carrier partners were below peak quarterly spend in our marketplace in Q3, reflecting ample room for additional growth.
Now turning to guidance for 2025, we expect revenue to be between $174 million and $180 million, representing 20% year-over-year growth at the midpoint. We expect VMD to be between $46 million and $48 million, representing 7% year-over-year growth at the midpoint. And we expect adjusted EBITDA to be between $21 million and $23 million, representing 16% year-over-year growth at the midpoint. As we continue to deliver better-than-expected revenue, we are taking the opportunity to invest in existing and new traffic lines in Q4.
While these traffic investments will further build our competitive differentiation and better position EverQuote, Inc. for long-term growth, they are expected to put some pressure on VMM and VMD in the period, which in turn impacts Q4 adjusted EBITDA and associated margin. Based on the midpoint of our guidance for Q4, we are expecting full-year 2025 annual growth in revenues of approximately 35% and annual growth in adjusted EBITDA of over 55%, reflecting our strong operating leverage. It is also worth noting that the midpoint of our Q4 revenue guide in combination with Q3 results implies top-line growth of 20% for 2025 compared to prior record revenues in 2024.
In summary, our performance year to date reflects our steadfast commitment to strong execution and a clear strategy. As we look ahead to 2026 and beyond, we remain focused on our goal of creating a $1 billion revenue business by being a leading growth partner for PNC Insurance and delivering on our long-term target of achieving average annual revenue growth of 20% with 20% adjusted EBITDA margins, a rule of 40 company. We believe that our clear strategy and the strength of our team and operating model will position EverQuote, Inc. to deliver continued growth and expanding profitability. Jayme and I will now take your questions. Thank you.
Operator: We will now begin the question and answer session. Thank you. Your first question comes from the line of Maria Ripps. Your line is open.
Maria Ripps: Great. Good afternoon, and thanks so much for taking my questions, and congrats on the strong quarter here. Just first, in terms of the sort of broader industry backdrop, as you pointed out, carrier profitability has been strong, and some investors have been asking whether carriers are approaching peak margins. Can you please share your view on the sustainability of current profitability levels and what that means for customer acquisition spend?
Jayme Mendal: Sure. Thanks, Maria. So yes, carrier underwriting is back to a very healthy and steady state level. Acquisition spend tends to lag the profitability a bit, and so we still see quite a bit of room to go in terms of the advertising spend keeping pace with the profitability trends. We have still got at least one major national carrier that's in the process of reactivating in Q4. We have still got 80% of our top 25 partners below their historical high watermark of spend and still certain state carrier combinations that are kind of working their way through.
So the good news is these soft market cycles tend to last five-plus years, and we think we are in the very early stages of it. So we do see some opportunity for continued strengthening as the balance of the carriers catch up in terms of their advertising spend with respect to where their underwriting profitability is now.
Maria Ripps: Got it. That's very helpful. And then, you just talked about sort of elevated investments in AI capabilities, technology, and sort of data assets here in the second half of the year. To the extent we can talk about this, what are some sort of key platform features or innovations that investors should expect in 2026?
Jayme Mendal: Yes. So some of our most significant investment has been in our Smart Campaigns product. That's our machine learning-based carrier bidding product. We have been getting broader adoption of that product over the course of the last year or two, and we have been investing in improving model accuracy and adding features to those models. And all the results that we have seen so far as customers adopt Smart Campaigns and then as we upgrade to newer versions is that they drive meaningful improvement in carrier performance. So as that happens, the net effect is the carrier will allocate more budget in our direction relative to alternatives.
It helps kind of propel this flywheel of better performance, better pricing, more traffic, more data, and that helps us drive more performance. So that's the area we have been most focused on. We do expect to extend some of the AI bidding products to local agents as we turn the corner into next year, an area we have been focused on. I have also spoken a bit about conversational voice. We have managed to introduce AI voice into our call workflows, and that's achieving good levels of performance. And that's really beginning to allow us to interact more with customers through AI modalities, which we expect to extend from that voice modality down funnel and into others over time.
Maria Ripps: Got it. That's very helpful. Appreciate the call.
Operator: Thanks, Maria. Next question comes from the line of Zachary Cummins with B. Riley Securities. Your line is open.
Zachary Cummins: Yes. Thanks for taking my questions. Good afternoon and congrats on the strong performance here in Q3. Jayme or Joseph, both of you could probably comment on this, but can you give me a little more insight into the incremental investments that you are making into new channels in Q4? Is there any way to break out the anticipated impact that you are seeing to VMM in Q4 as a result of these channels? Just trying to get a sense of what's the best way to think about VMM over the next couple of quarters.
Jayme Mendal: Sure. Why don't I start, and then I will let Joseph expand on it. So, you know, the channels, there's a handful of channels that we have, most of which we have been active in, in the past but have subsided through the hard market, and now we are in the process of rebuilding. These are some of the higher funnel channels. So that could be social, video, display, connected TV, things like that. And typically, when you launch new campaigns in these channels, it takes a while to kind of get the right creative, right bidding strategy in place.
And for that period of time when you are just in the early stages of optimizing those campaigns, they tend to run at lower or in some cases even negative margin. And so that's kind of how it flows through into the financials. The other sort of category that we are focused on is AI search. Historically, we have not done much SEO traffic here at EverQuote, Inc. For better or worse, today I would say that's kind of a positive thing because we haven't been there's been nothing to sort of disrupt as the organic search results have changed. And so we view the AI search as kind of a clean sheet for us.
And we are making some investments and beginning to build out our presence in those platforms.
Joseph Sanborn: With regards to VMM, if you look at the midpoint of our guide, it's sort of close to 27% on VMM margin. We were closer to 28.8% in Q3, comparable in Q2. I think about the impact in the quarter, it's probably a couple of 100 basis points of investment you are doing in new traffic channels on the VMM line. So just to give you context. And I think it's how we think about VMM, in general, we still think it's going to be in the high 20s over time. It fluctuates quarter to quarter based on what's going on in the broader market. I think it's important to call out when you think about VMM margin, two factors.
One is it reflects the advertising environment we do not control. We do not control the advertisement environment broadly. What we do control is how we apply our models and our technology to be efficient in going after that advertising dollar. And, Zach, you and I have talked about this in the past, but just for context, if you look at our VMM margin being in the high 20s, go back to 2022 and our business was much smaller. The VMM margin in auto was in the high 20s, and we were a $275 million business.
The fact we are 2.5 times bigger now in scale and we are having the same margin speaks to, yes, there is certainly a more competitive advertising environment and more folks going after it, but our bidding technology is working. We are getting more efficient, and that's driving results. So we will continue to make those investments this quarter, and you will see those benefits as we progress into 2026 and beyond.
Zachary Cummins: Understood. And just my one follow-up question is just the broader appetite that you are seeing from your carrier partners to ramp up budgets. I thought it was interesting to hear that 80% of your top 25 still isn't at peak spend. So just curious what you are hearing from some of these partners and how they are thinking about deploying budgets as we move into 2026?
Joseph Sanborn: Chris, maybe I will start with where we are now in Q4. So typically, we have a seasonally down Q4. If you go on the average of seasonality for the past seven years, typically Q3 to Q4 is down. So 4%, 5% dip. We are actually showing that we are actually expecting a quarter that's up at the midpoint, actually up in the full range of our guidance. I think that reflects that we see carriers seeing really healthy underwriting margins that we have been talking about throughout this year.
As we progress through the year, some of the uncertainty has been replaced by greater certainty, whether it be the impact of tariffs on underwriting costs, whether it be the cat environment. As we have gone further into the year, they are feeling stronger, and we are seeing that result in what we are seeing today, which is them defying the normal seasonal pattern and really engaging to continue customer acquisition. As you look to next year, as Jayme touched on, the backdrop remains very strong for carriers. We see an environment where the health will continue on the underwriting margins for everything we are seeing and hearing from our carrier partners.
As Jayme mentioned, often the health of the carriers comes before you actually see the spend pick up as fully. I think there's continued growth you will see from carriers into next year. You match that on the consumer side, where we have consumers continuing to shop for alternatives. So that's a really good combination for us.
Zachary Cummins: Understood. Well, thanks for taking my questions, and congrats again on the strong results.
Joseph Sanborn: Thank you, Zach.
Jayme Mendal: Thanks, Zach.
Operator: Your next question comes from the line of Jason Michael Kreyer with Craig Hallum. Your line is open.
Jason Michael Kreyer: Great. Thank you, guys. So we are hearing a lot more from carriers that are pursuing kind of strategies that would have rebating to consumers. So I am just curious what your take is on that, if there's any impact, if that kind of takes away from budget that historically could go into performance marketing. Or if that has any impact on what you guys could potentially absorb from carriers?
Jayme Mendal: We have not heard anything about that in our interactions with carriers. I think it's a representative of the broader underwriting environment, which again is quite healthy, meaning the carriers are quite profitable. And so rebates are one way they can sort of approach that depending on what problem they are trying to solve. I would say the overarching problem that most carriers right now are trying to solve is growth. And that's all they talk to us about.
Joseph Sanborn: That's reflected in how they are kind of leaning into the marketplace probably right now.
Jason Michael Kreyer: Appreciate it. And then so last year as we got into this time of the year, we saw somewhat of a budget flush from carriers. You pointed out the attractive profitability metrics. Is that predicated on guide? Or I am just curious what you are assuming in the balance of Q4 here, what's baked into the guide?
Joseph Sanborn: Yes. So for the guide for Q4 is obviously assuming carriers defying the normal seasonal pattern being down from Q3 to Q4. So that was the underlying basis that the carriers are seeing sort of pulling forward investment into this quarter. I won't use the term you used. I will say they were pulling forward growth investment into Q4. Customer acquisition. And I think that's clearly happening, and that's reflected in our guide.
Jayme Mendal: And Joseph, that year-end budget flush isn't really having much of an impact on VMM. Like, that's not a component of the sequential pressure?
Joseph Sanborn: So I guess when you look on the VMM, when you look at the VMD line, all other things equal, Q4 if you have the environment where it is you are defying the seasonal pattern on revenues being higher than the norm, that can put some pressure on advertising costs, particularly in Q4. We fund some traffic here as we have broader comp from retail and holidays. So there can be some impact in VMM in the quarter from that. But I would say that's relative to what we described earlier, that's more modest than our investments in the new traffic channels. I think theoretically it has some impact in Q4.
But I guess when I still come back to the carriers and their budgets for the period, I think we go into this saying they feel very bullish, and they are reflecting that. I think relative to last year at this time, I think they are coming into this quarter seeing with a greater sense of clarity on how the year is progressing. They are quite healthy.
As they progress through the year, the uncertainty they may have seen, whether it's from tariffs affecting underwriting costs, uncertainty over the cat environment, those uncertainties have been replaced by clarity as they have gotten those and we are able to lean in early in Q4, and we are reflecting that in our guide.
Jason Michael Kreyer: Thank you, Jason. That's it.
Operator: Next question comes from Ralph Edward Schackart with William Blair. Your line is open.
Ralph Edward Schackart: Good evening. Thanks for taking the question. On the call today, Jayme, you talked quite a bit about transforming the model from lead generation vendor to multiproduct provider, which obviously would be a pretty important strategic shift. Just any more color you can provide on this, you know, without disclosing exact products for competitive reasons. But just conceptually, just trying to figure out where you are focused on product innovation, and then you maybe sort of talk about the evolution of this change in the model and would you be, I guess, sort of moving away from a transactional model or sort of, like, entertaining new revenue models in the future? Any help on that would be great. Thank you.
Jayme Mendal: Yeah. Thanks, Ralph. Yes. So I mean, we have strong large relationships with all the big carriers and thousands of local agents. And those relationships have been built and are predicated predominantly on the sort of referral, the click, or the lead that we are selling to the carrier or the agent. And our sense is that the carriers and the agents, we can deliver them a lot more value by wrapping sort of value-add technology, data, and services around that core referral product. So in the case of a carrier, the example we have talked about is giving them bidding services through Smart Campaigns, this AI-enabled bidding solution.
There are other services on the carrier side we will not mention at this time. On the agent side, again, the vision is to really evolve to become their one-stop shop for all things growth. So agents spend money on leads to generate growth. There are a lot of other things that they spend money on, whether it's telephony services or calls or digital services. And we have now built out a much more robust product suite that allows us to solve for the vast majority of agents' needs as it relates to growing their local agency. So the idea is to build these deeper relationships, which add a lot more value.
They are built on mutual trust, more data sharing, and they are built on top of some of our distinct advantages in the data that we have and the technology that we are able to build around that data to ultimately deliver more performance for the agent, for the carrier, and also allow them to consolidate to have fewer vendors to deal with. So that's like the thrust of the strategy. As it relates to the commercial model, Ralph, I think over time the answer is yes. And we started doing this with the local agents.
Like we do have, albeit relatively modest in the relative to the scale of EverQuote, Inc., we do have a nice chunk of recurring subscription revenue that is building with the local agents as we execute on this strategy. And so I do think there's opportunities to begin to think about evolving the commercial model over time. But the most important thing to us right now is to get the products right, to get them adopted, to prove the value, and then we build from there.
Ralph Edward Schackart: That's great. Thanks, Jayme.
Operator: Thanks, Ralph. Your next question comes from the line of Mayank Tandon with Needham and Company. Your line is open.
Mayank Tandon: Thank you. Good evening. Congrats, Jayme and Joseph, on the quarter. Jayme, I wanted to touch on the $1 billion revenue target. Is that an organic target, or would you also factor in M&A to get to that level? Because when I think about what Joseph said, the 20% growth model, then that would get you close to a billion dollars in actually two, two and a half years. So just curious on sort of what are the underlying drivers behind that target and whether it's organic or it includes potential M&A?
Jayme Mendal: Yes. So we have a plan to achieve that goal organically. And I will let Joseph expand on how we think about M&A in this context. But when I talk about our path to $1 billion, it's an organic path. And we have got the roadmap. On the distribution side, it's really about just executing the playbook, which is improving the performance for carriers and agents through the use of our AI products like Smart Campaigns in order to get more budget and more favorable pricing. We can take that budget, that pricing, and push it downstream back into traffic to increase our traffic share.
But at the same time, we are going to be expanding into more traffic channels as we have talked about earlier already. So we are accessing more traffic and winning more of it. And then we have got a lot of room to continue growing in our non-auto verticals, specifically in home. And as we can start to consider other PNC verticals, that might make sense under that umbrella. So that's more or less the ingredients of the path to $1 billion, and we think we can get there organically in the timeframe that I suggested.
Joseph Sanborn: Let me give you the math. I think you kind of got there, Mayank, just for those who weren't doing the math as quickly. That implies a three years to be sort of mid to high teens to be the growth rate. If it took two years, it would be sort of low 20s in terms of business revenue growth rate. So I think that gives you a sense of how we frame it. Like we feel bullish on our ability to get here through organic means. Do we see an opportunity to potentially supplement that through M&A? Yes, we see that opportunity as well. In our minds, M&A comes back to the same criteria we discussed previously with folks.
We view it as accelerating our strategy to win in PNC and being the number one growth partner to carriers and agents in this vertical. I mean, there could be opportunities to do that. We do, by no means, see those as necessary to achieve that $1 billion goal.
Mayank Tandon: Got it. That's super helpful. And then also just turning to margins, I think Joseph, you said 100 to 150 bps is the target model. I know that's not guidance, but just as I think about that, is that going to come from eventually maybe a little bit of an improvement in VMM when some of these maybe advertising pressures abate? Or would it be more heavily weighted towards operating leverage in the model?
Joseph Sanborn: So I think when I look at EBITDA, just give some context. Right? So 2023, we had none, right? 2024, we went to 11.6%. I think we brought a lot of operating leverage into the model and really focused where we were spending on our investments in technology, the things that give us greater leverage. If you look at 2025, the midpoint of our guide implies we are actually going to gain over 200 basis points at the midpoint from 2024, so that 13.6% or whatever. So I think you are seeing us at a pretty significant clip over the past few years. If we look to next year, we always say 100 to 150 basis points on average.
I would probably say we are targeting towards the lower end of that for next year. We think about EBITDA. But I also would say that our EBITDA, we view it as continuing to be high cash converting. So that EBITDA will be a very high cash conversion into operating cash flow in the period, subject to normal working capital. And then in terms of margins, I would say we still sort of we continue to see VMM in the high 20s. I think it's important to give some context on this, which is it is a market where there's things we control and there's things we don't control. You don't control the broad advertising environment where we buy advertising.
So if there's more demand in that market or less demand in that market, that can impact advertising costs in the period. What we do control is the investments we make in our bidding technology and how we use that technology to more efficiently acquire traffic and drive that to our carriers and agents. And so when I think about the business, I would say, we still think high 20s, it will fluctuate quarter to quarter based on various things going on in the market and also the investments we are making. But again, on the operating expense side, we certainly will see a step up from Q4 to Q1 as we customarily do.
And we will continue to be making investments in our technology around AI and other areas, our data access. So we think we will build on some of them. We are playing investments to win. We are not just trying to do this to drive 20% growth and get to the EBITDA margin overnight. We are going to do it in a way that's setting us up to really succeed in this market long term and really be the premier growth partner to carriers and agents in the long term.
Mayank Tandon: Thank you, Mayank.
Operator: Next question comes from Jed Kelly with Oppenheimer. Your line is open.
Jed Kelly: Hey, great. Thanks for taking my question. Just on investing in some of the newer traffic channels, how much of this is at your discretion doing this versus some of your competitors that are probably also operating at low 20% margins? And I imagine they are doing this to drive more traffic to carriers to get more budget. So can you just talk about how much of your discretion versus potentially responding to competitors?
Jayme Mendal: It's entirely at our discretion, right? I mean, we are making investments that are very much consistent with our long-term strategy. And we think these are investments that will help us achieve that $1 billion goal, grow at 20%, to that 20% adjusted EBITDA margin over time. So this is all very consistent with our long-term strategy. We don't pay super close attention to how our competitors' margins or ad costs are moving around over time. Right? Like we have our financial plan, and we have got a pretty good track record of achieving that plan. I can appreciate that others may choose to make certain trade-offs at various points in time.
But we have had a pretty consistent track record of just kind of executing our plan and staying heads down. And getting into these channels will be important for us to achieve that plan because the demand from the carriers and agents is definitely there right now. And we have got to be able to continue growing volume to meet that demand.
Jed Kelly: And then just as a follow-up, how should we view your act in sort of your longer-term goals as a percentage of VMM, I guess? Because you know, one could argue your VMM is your true revenue. Right? So how should we look at that? Thanks.
Joseph Sanborn: Yes. I guess, Jed, I appreciate you made that comment before. I continue to look like EBITDA margins in the traditional sense relative to revenues, just EBITDA margins. And so they were 11.6% in 2024. The midpoint of our guide puts them in mid-thirty 13.5% this quarter, so a couple of 100 basis improvement from last year. And we will add another 100 basis points as our target for next year. We will continue to do that 100 basis on 50 basis points every year. So I think that's how we think about it.
And of course, as VMD scales, of course, the thing we are doing is some dollars will go to the bottom line to drive incremental adjusted EBITDA, and some dollars in a given quarter will go to investment. Those investments will be principally in technology areas and particularly around AI and our leveraging our data assets to help us build a longer term to position us for longer-term growth and competitive differentiation. And that remains our strategy, and that's how we are approaching it. And that means OpEx, you will see those investments as build through next year.
But just as we have done this year, we have managed very carefully in terms of as we have added incremental investments, you have seen as we said at the start of this year, they would add 150 basis points in adjusted EBITDA that is actually 200 basis points. So if you look at the midpoint of our guide if that is achieved. And so I think we are very good at saying what we are going to do and then execute against that and then delivering as a result.
Jed Kelly: Thank you. Very helpful and great quarter.
Joseph Sanborn: Thank you, Jed.
Operator: Your next question comes from the line of Cory Alan Carpenter with JPMorgan. Your line is open.
Cory Alan Carpenter: I had two financial questions. Just on the traffic investments, how long do you expect those to impact VMM margins? And do you ultimately expect them to run at parity with your other channels? That's the first question. And second question, a lot of talk around the 20% growth target. Maybe just asked directly, is that something you think is achievable next year given the tougher comp? Thank you.
Jayme Mendal: Yes. So I will take the first one. I mean, the investments typically when we are ramping up a new channel or a new program, it's one to two quarters where we are launching, we are optimizing, and we are scaling. At which point, I do think that we would these channels would kind of blend in at comparable, you know, at VMM levels to our existing traffic portfolio. So we view this as a long-term these channels as weighing down VMM in the long term. But there is a bit of a start-up cost that you incur when we start launching into some of the new channels.
Joseph Sanborn: And then in terms of how we think about top-line growth, just some context, right? As we look at obviously, you point out, we have had some tougher comps relatively speaking as given the very strong growth we have had 24% into 25% as auto recovery has progressed. What we mentioned in our prepared remarks is in 2025, you have had 20% year-on-year growth relative to the second half of 2024, which was a record prior to this year. Second half of this year. So I think you are seeing us continuing to do well as levels start to normalize. And then we talked about our two to three-year goal of getting to $1 billion in revenue.
So I am not going to tell you in this call if we are going to get exactly 20% next year or not, but I think as we look at it, we feel very good about averaging 20%. And over time. Importantly, to that $1 billion goal in two to three years of top-line growth organically.
Cory Alan Carpenter: Great. That's helpful. Thank you both.
Joseph Sanborn: Thank you, Cory.
Operator: Our final question comes from Mitchell Rubin with Raymond James. Your line is open.
Mitchell Rubin: Hey, thank you guys for taking my questions. This is Mitch on behalf of Greg Peters. So I was wondering if you could provide us with an update on the progress of CALIS four with carrier participation. And how much impact a full panel of carriers would be? Thanks.
Jayme Mendal: Yes. So California has been sort of steadily kind of ramping carrier by carrier, segment by segment. And so there is meaningful spend in the state now. I think it's like a top three to five state in Q3. Of course, it is the largest state, so it's still just not quite proportional to its potential scale yet. We view California as having still some room to grow. It's a little hard to dimensionalize that, but we think there could be still some meaningful upside left in California as we progress into next year. And we would hope to get California back to kind of a steady-state environment sometime in 2026.
Mitchell Rubin: Great. Thank you for the color on that. So my follow-up is, you guys have done a great job of managing advertisement costs. Where is there any room for improvement, or is most of the incremental leverage going to come from investments in technology?
Joseph Sanborn: So the way we look at the business is we are always looking to drive efficiency in the business. Right? How do we simplify? Do we be more efficient in the business? And as we have talked about in some of our prior calls, I think it's been one thing that's been ingrained in us as a management team is how do we think about how we allocate our dollars in a way that we are getting the right return for shareholders. Having gone through the period we did, it's sort of a silver lining in that period. So that has continued. And we continue to see ways that we bring more efficiency in the business.
So for example, this year, headcount is up roughly 10% if I look into Q3 where we landed. But operating costs are basically the same. That reflects we are driving efficiency. We are changing the composition of the team. We are also using technology to make the team more efficient and get more productivity through the team. As we look ahead to next year, we are not seeing a lot of significant increase in headcount. We are seeing continued investment in AI areas and including technologies that help the team leverage AI more efficiently. And so that's where I think you will continue to see us doing that.
That will be driving I think a lot of leverage for us and efficiency going forward.
Jayme Mendal: Yeah. Just to give maybe a couple of examples, right, like our AI bidding technology has really allowed us to do a lot more with our traffic operation teams where we have effectively automated a huge amount of work that used to be manual. Now we have turned that in through Smart Campaigns out to our carriers, and our carrier-facing teams now have to do a lot less manual campaign management on behalf of carriers. So all of our bidding automation has been a huge unlock in terms of efficiency. Within our engineering organization, we have got broad adoption now of co-pilots for engineering.
In some cases, we have teams that are writing code like they are just inferencing code as the primary way of writing code. So we are getting some real benefit in our engineering organization. What else? We have talked about our voice agents. Right? So our call center operations are we are now beginning to introduce voice agents into that to reduce some of the reliance on human call center operators. So it's really within every function of the business we are finding ways to drive efficiency. And we are in fact going function by function to sort of systematically identify activities that can be automated using GenAI or just good old-fashioned software.
And it is a process that will continue all through next year.
Mitchell Rubin: Thanks. I appreciate the color on that. Congratulations on a great print.
Jayme Mendal: Thank you.
Joseph Sanborn: Alright. Well, I yes. Go ahead. Go ahead, operator.
Operator: And with no further questions in queue, I would like to turn the conference back over to management for closing remarks.
Jayme Mendal: Thank you. Thank you. And thank you all for joining. The state of the business is strong. It's getting stronger. As we continue to produce record performance quarter after quarter. We are accelerating right now our innovation of new products, features, traffic data, AI capabilities. And as we do, we are transforming from a lead gen vendor to a growth solutions partner for our customers. We are very energized to continue growing towards our $1 billion revenue goal as we build EverQuote, Inc. into the leading growth partner for PNC insurance providers. Thanks all for joining today.
Operator: This concludes today's conference call. You may now disconnect.